Finance Minister Pranab Mukherjee in opening remarks stated that asingle budget speech could not solve all problems and made it evident that manyissues would be left untouched in his budget. Big spends were announced in thebudget that carried a social and rural focus in line with the UPA’s agenda ofinclusive growth. We had stated in our pre-budget note that the corporate sector and the stock market may not be pleased post theevent. As we anticipated, the government has bought time till the next budget,not too far away, to possibly create a concrete plan on a number of issues suchas FDI, corporate taxation and STT. Meanwhile, it can monitor the trends inglobal economy and country’s fiscal deficit and utilize monetary measures ifrequired.

The stock market reacted negatively and the Sensex fell by 850+ points,which is the biggest budget day crash. This was primarily due to the higherestimates for fiscal deficit at 6.8% for FY10 (against 6.2% in FY09), absenceof major disinvestment program (Rs11bn targeted), non-liberalization of FDI incertain sectors and lack of indication about return to FRBM targets. Further,increase in MAT rates from 10% to 15% was a big negative. While some measureswere taken along expected lines for export-related sectors and IT, the budgetdid not significantly improve the fortunes of any sector in particular. Infact, lack of major positive announcements for certain sectors like real estateand education was disappointing. The key positive moves were abolishingcommodity transaction tax, withdrawal of personal income tax surcharge and aroadmap for goods and services tax (GST).